Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Simplicity has cut its floating rate for ballot-winning FHB members to 2.25%, a drop of -25 bps.
TERM DEPOSIT RATE CHANGES
ANZ has cut term deposit rates, again. BNZ and the Bank of China also cut. And we missed a Wednesday Kiwibank cut to TD rates as well. It's getting closer to the point where rates above 1% will look 'good'. At least one bank, Heartland, still has a 2% offer for 2 years. It's a lone stand.
COST OF CAPITAL GOODS RISING
With consumer inflation low (1.5%) and producer input (+1.0%) and output (+0.3%) costs low as well and in the +1% range or lower, the cost of new investment in capital goods is rising at more than double the rate, another inhibitor to increasing investment. Capital goods inflation is running at +2.3% in the June quarter. Even though this is its lowest since 2004, it is rising noticeably higher that other prices.
WINNERS & LOSERS
On the farm non-livestock costs are rising at a low rate too (+1.0%). But there is large variability between different types of farms. For example, dairy farm costs are rising at the rate of +2.3% per year while those for sheep & beef units are falling at the rate of -1.2% per year
INTERESTING
We found this interesting.
VOLATILE SPARRING
The gold price is taking it on the chin today, and then making a half recovery. Yesterday at this time it was at US$2,006/oz. It ended down -US$76 in New York trade at US$1,930/oz. Now in Asian trade it is back up to US$1,947/oz. The net of all that is a -2.9% drop. On the same basis, silver has fallen -2.2%. Interestingly, this is more volatility than bitcoin.
IT'S NOT ONLY PMs
In heavy trading, the iron ore price is still rising.
FLOOD WATCH
The flooding if the Yellow River and Yangtze River basins has disrupted millions. It is about to peak. It is late in their rainy season for this to be happening. All eyes are on the integrity of their major river dams, one of which, the Three Gorges Dam is the world's largest.
EQUITY UPDATES
The S&P500 fell away at the end of the session in New York today, closing down more than -0.4%. That followed European markets last night that were up about +0.8%. Today, Shanghai has opened down -1.1%. Hong Kong has opened almost -2.0%. Tokyo is down -0.7%. In Australia, they are all lower too with the ASX200 shedding -0.9% in early afternoon trade. Here the NZX50 Capital Index is down -0.5% after being higher in the morning session.
SWAP RATES UPDATE
Swap rates are little-changed today, a little softer at the short end, a little firmer at the long end. The 90-day bank bill rate is down -1 bp at 0.27%. The Aussie Govt 10yr is unchanged at 0.87%. The China Govt 10yr is up +3 bps at 3.02%. And the NZ Govt 10yr yield down -1 bp to 0.66% and a new all-time low. The UST 10yr is up +1 bps at 0.67%.
NZ DOLLAR HOLDS
The Kiwi dollar is lower at 65.6 USc. Against the Aussie we are firmer at 91.4 AUc. Against the euro we are also firmer at 55.4 euro cents. All those changes cancel each other out and the TWI-5 is unchanged at 68.7.
BITCOIN SOFT
The price of bitcoin has fallen back again today, down another -1.6% to US$11,753. The bitcoin price is charted in the currency set below.
This soil moisture chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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33 Comments
U.S. shares made their debut on Sharesies today. Had a quick scan and all the usual suspects were there: Apple, McDs, Berkshire Hathaway, etc. Signed a U.S. tax declaration and now free to gamble away. Don't expect anything too exotic but quite fascinating. The ruling elite seem to be encouraging this.
DGM about the household debt situation from the MSM. Words and phrases like 'staggering', 'grim', 'vicious cycle', 'tough decisions' bandied around.
https://www.stuff.co.nz/business/money/122480540/staggering-number-of-h…
The rich get richer
https://wolfstreet.com/2020/08/19/the-fed-made-sure-the-rich-got-richer…
Thanks - I sighed my way through that article. For a laugh I had a look at what the next President plans to do about stuff that matters:
https://joebiden.com/joes-vision/#
The rows and rows of headings indicate a solid stream of social engineering rubbish - I didn't see anything even approaching tough fundamental issues like what to do with the Fed's madness, tax reform - nothing. Not even anything on foreign policy. SO it's obvious whose votes he's shooting for, and he'll win, but what then?
Instead of looking at something potentially useful like abolishing the Fed, it looks like he's going to ask them politely to carry on and try to do better:
https://www.npr.org/2020/08/01/897911727/biden-wants-the-fed-to-help-cl…
https://www.cnbc.com/2020/08/13/biden-looks-to-former-fed-chair-yellen-…
I suspect they have a woolen hat, that rolls down, all ready for him.
Negative interest rates
https://wolfstreet.com/2020/08/19/how-negative-interest-rates-sap-consu…
On the Three Gorges Dam, here is a link to the water level monitor of their reservoirs:
http://www.cjh.com.cn/swyb_sssq.html
三峡水库 is the 3GD, although most modern browsers should offer to translate the page for you. At time of writing, the water level in 3GD is 162.42m - that's above the flood control level of 155m and below the expected tolerance of 175m. Inflow of 75,000 cubic meters per second and outflow of 49,000 so water levels will be rising steadily.
Regarding gold vs bitcoin, I hold both, and put my bitcoin profits into gold. Now that is nice I have seen gold fall faster than bitcoin in a day. Even Ethereum usually falls slightly more, but has larger gains on the upside. The whole risk reward is looking topsie turvey
Capital goods inflation is running at +2.3% in the June quarter. Even though this is its lowest since 2004, it is rising noticeably higher that other prices
It doesn't come as a surprise that the cost of investing in labour-saving equipment has been running much higher than Labour Cost Index for years now.
I don't think this measure includes equipment servicing costs (repairs & maintenance), which can cost a bomb when running a highly-specialised machinery.
Now that would be a stat comparison worth monitoring. Since the Porter project graced us with their wisdom, we've been running with the idea that a lifetime career in a labour-based profession is a drain on our competitive advantage. The result is that many people in previously labour-intensive industries have been on the scrapheap fr three generations. They (and we) are paying a heavy price, but the benefits are shared by few.
A fiat currency is all about debt. Govt backing bank loans, dropping interest rates and directly encouraging the inflation of house and stock prices. Yet way too hard to figure out an insurance for deposits, so clearly an attempt to push everyone into property or stocks. How much longer before more people see what a sham the entire financial system is? With only 45% of the nation living in their own homes, the majority 55% have an excellent opportunity to do their own research and find out for themselves why so many in America are calling to "end the fed".
For those who can see, if the mortgage deferral rate was a default rate, this would be worse than the gfc. Nevermind, it's a great opportunity for the 1% to get richer, and the 45% to borrow more.
30%+ of nz gdp is in financial services, what % in real estate?
The velocity of money is the key for the financial sector, all those transaction fees etc, what about real estate? Same thing, it's the lawyer's fees, the building reports, the compliance certificate, the paint job, new kitchen bathroom,the agent fees etc etc that comes through the velocity of house sales and purchases that stimulate the gdp.
So, they, the central bank and govt don't want house prices to drop, great, got that covered, people don't have to pay their mortgage, oops, now no one is selling, oops, need some clever way to stimulate the number of sales, without prices dropping. Good luck to Orr and Robertson with that one.
No doubt they'll succeed. In the meantime, while the majority are stuck in the MSM headlights, some fortunate ones will take a portion of their wealth out of the fiat system, and away from irresponsible privately owned central banks, and govts that want control and enslave everyone. To anyone who hasn't already got to grips with the alternatives, and would like to look into it, Mike Maloney, "The Hidden Secrets of Money", about 9 half hour episodes on YouTube, is an excellent starting point.
That's my 2 pence worth.
He just puts the whole thing, from the fed, through to bitcoin and DSL, in such simple terms. I can't think of anyone else who covers the bases so well. Is there a lot more to the story? Of course, I spend time looking at the info on the lbma and the comex, or the "crimex", as it is more popularily known. The thing for me is that we are not taught this stuff, since 1971, gold and silver has been completely maligned by "modern economics", taken out of academic curriculum, so when people first begin to learn this stuff, it's quite unsettling. There is plenty of material on the fed, how it was formed, its dirty tricks, etc etc, yet for someone that doesn't know, Mike can be a good starting point. Who would you suggest?
“This is the most shameless, unprincipled, and disingenuous campaign from big food we’ve seen so far. Every dollar the Government spends right now is borrowed from tomorrow’s generations."
Taxpayer Union in response to a petition launched by the Restaurant Association calling for subsidies of up to $20 per person for meals served at restaurants, cafes and bars. It would run for a month and the association estimated meal subsidies would cost the Government about $27m.
https://www.stuff.co.nz/business/122507248/restaurants-want-government-…
Sounds like TU are looking at some kind of creative destruction.
I wonder if TU ever considered paying back the subsidies they received.
https://www.newshub.co.nz/home/politics/2020/04/coronavirus-taxpayers-u…
"We found this interesting." [NZ Covid testing rates as proportion of confirmed cases].
https://ourworldindata.org/grapher/number-of-covid-19-tests-per-confirm…
These stats need to be read in context, as discussed with Gareth, here: https://www.interest.co.nz/opinion/106627/gareth-vaughan-lack-positive-….
[& why recently ramped up tests is still low, and lost oppty to avoid lockdown and for NZ to be #2 on every vaccine makers list. Also, even now, could cut quarantine needs/costs, even reopen borders, safely. But needs new/diverse thinking, not just incremental fixing mistakes and 'more of the same']
BBC Coronavirus-hit Qantas posts £1bn annual loss. "Qantas has reported an annual loss of almost A$2bn (£1bn; $1.4bn) as it deals with the impact of the coronavirus pandemic.
The Australian flag carrier's boss says trading conditions are the worst in the airline's 100-year history.
The firm also says around 4,000 of its 6,000 planned job cuts are expected to be finalised by the end of next month". https://www.bbc.com/news/business-53831056
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